CA3056533A1 - Method and computer-implemented platform for making an investment in an investment plan - Google Patents

Abstract

A method and computer-implemented platform are provided that facilitate use of unused annual and/or accumulated contribution space in an RRSP and/or TFSA, or a TDI cash account. In the case of an RRSP, by monetizing the unused annual and/or accumulated contribution limit at the effective tax rate in the year of investment and paying only 50% upfront. In the case of a TFSA, by monetizing the unused annual and/or accumulated contribution limit by only paying 50% of the cash investment upfront. In the case of investment from a cash account for a TDI, by reducing the passive income eamed, the investor can be saving the amount of income subject to the small business tax rate.

Description

CA Application Blakes Ref: 78558/00022 METHOD AND COMPUTER-IMPLEMENTED PLATFORM FOR MAKING AN INVESTMENT
IN AN INVESTMENT PLAN
TECHNICAL FIELD
[0001] The following relates to a method and computer-implemented platform for making an investment in an investment plan, for example, for a Registered Retirement Savings Plan (RRSP), a Tax Free Savings Account (TFSA), and/or a Tax Deferred Income account (TDI).
BACKGROUND

[0002] The Canadian government, from time to time, passes legislation aimed to achieve its policy objectives related to investment plans. Three such programs include investment plans known as RRSPs, TFSAs, and TDI accounts.

[0003] . Under the personal income tax regimes of many countries within the Organization for Economic Co-operation and Development (OECD), including Canada, incentives are provided for individuals to invest in their retirement savings, to add to their personal saving, maximize their after-tax returns, among other programs.

[0004] In Canada, retirement savings incentives are provided through an RRSP, and in the United States, through Individual Retirement Accounts (IRAs). Under the Canadian RRSP
system, funds invested in the plan up to a contribution limit of 18% of earned income (subject to annual limits) annually are deductible from the individual's income for income tax purposes, and investments within the plan can grow tax-deferred until withdrawn from the RRSP. If less than the contribution limit is contributed in any given year, since 1991, that unused contribution amount can be carried forward for use in later years until the end of the calendar year in which a taxpayer turns 71 years of age, at which time expires The total accumulated amount of unused contributions, including the contribution limit for the current tax year may be referred to hereinafter as a cumulative unused annual and/or accumulated RRSP contribution limit.

[0005] At a given retirement age, the individual begins to distribute from an RRSP and pay tax on these distributions at the individual's tax rate at that time. The types of investments permitted within the plan are normally regulated. In Canada, for example, investments in an RRSP must satisfy the definition of a "Qualified Investment" under subsection 146(1) of the Income Tax Act (Canada).

[0006] One problem with the RRSP system in Canada is that many individuals lack sufficient funds to take full advantage of the tax benefits by maximizing their annual RRSP

23740521.1 =
CA Application Blakes Ref: 78558/00022 =
contribution. Statistics Canada indicates that over 90% of Canadian taxpayers do not maximize their annual RRSP contribution. Since unused contributions can be carried forward from year to year since 1991, these taxpayers may accumulate a large amount of unused RRSP
annual contributions as their annual and/or cumulative RRSP contribution limit.
Therefore, unless that taxpayer contributes, what is often considered a significant sum towards their annual and/or unused RRSP contribution room, the gap between what that taxpayer is taking advantage of, and what is available typically continues to grow over time, making it more difficult to take full advantage of the annual and/or unused RRSP contribution room and related tax benefits for contributions currently and in future years. Many individuals do not have sufficient funds to take full advantage of the tax benefits by maximizing their unused annual and/or accumulated RRSP
contribution room.

[0007] Other types of investment plans may also exist in certain jurisdictions that permit up to a maximum contribution in any given year. For example, in 2009 Canada introduced the TFSA with an annual contribution limit that is to be indexed in subsequent years. A TFSA is an account that, while there is no income deduction for contributions, does not apply taxes on interest earned, dividends, or capital gains and all TFSA funds can be withdrawn tax-free. An individual can invest funds up to the contribution limit for that year, each year, and any unused contribution room can be carried forward indefinitely. Like with an RRSP, many individuals do not have sufficient funds to take full advantage of the tax benefits by maximizing their annual and/or unused TFSA contribution room.

[0008] In Canada, since 2018, the federal government has mandated that for each dollar of passive income above $50,000 annually earned by companies will result in a reduction of five . dollars in the small business qualifying income available for small business tax rates. The TDI
investment plan allows companies to defer passive income and/or defer annual tax increases caused by passive income above $50,000 annually thereby reducing the amount of tax paid annually until maturity. This is beneficial to Canadian companies wishing to maintain the maximum available income qualifying for small business rates annually thereby reducing annual taxes.

[0009] Individual Canadians using TDI can defer income to a maturity date and allow investment returns to compound annually without annual tax until the maturity date. This is beneficial to individual Canadians wishing to maximize investment returns.

[0010] It is an object of the following to address the above-noted considerations.

23740521.1 CA Application Blakes Ref: 78558/00022 SUMMARY

[0011] The following method and computer-implemented platform facilitates use of unused annual and/or accumulated contribution space in an RRSP by monetizing the unused annual and/or accumulated contribution limit at the effective tax rate in the year of investment and earn returns on a tax-deferred basis. It is recognized that unused RRSP annual and/or accumulated contribution space represents unlocked value to an investor. By planning and executing the timing of investment and income, the computer-implemented platform described herein can be used to increase RRSP contributions and:

[0012] - generate an income deduction and maximize the tax refund or credit at the effective tax rate in the year of investment, thereby reducing the net upfront cost of the investment, leading to increased returns on net investment over time;

[0013] - provide leverage by only requiring 50% of the funds required to be paid upfront, with the balance of funds due on maturity, while earning a return on 100% of the funds until maturity; and

[0014] allow compounding of the principal and income inside the RRSP on a tax-deferred basis;

[0015] wherein, in this way, the unlocked value can begin earning a tax-advantaged, tax-deferred, leveraged, and compounded return rather than waiting for the individual to accumulate a similar amount of funds to make the same investment down the road, if at all.

[0016] The following method and computer-implemented platform facilitates use of unused annual and/or accumulated contribution space in a TFSA by monetizing the unused annual and/or contribution limit and allowing investment returns to be earned tax-free. It is recognized that unused TFSA annual and/or accumulated contribution space represents unlocked value to an investor. By planning and executing the timing of the income earned tax-free resulting in increased savings, the computer-implemented platform described herein can be used to increase TFSA contributions and:

[0017] - lead to increased tax-free returns over time;

[0018] - provide leverage by only requiring 50% of the funds required to be paid upfront, with the balance of funds due on maturity, while earning a return on 100% of the funds on a maturity date; and 23740521.1 CA Application Blakes Ref: 78558/00022

[0019] - allow compounding of the principal and income inside the RRSP on a tax-free basis;

[0020] wherein, in this way, the unlocked value can begin earning a tax-free return, leveraged and compounded return rather than waiting for the individual to accumulate a similar amount of funds to make the same investment inside or outside a TFSA down the road, if at all.

[0021] The following method and computer-implemented platform facilitates use of TDI cash accounts by monetizing the value of reducing annual passive income at or below $50,000. It is recognized that this represents unlocked value to an investor. By planning and executing the timing of the passive income earned resulting in increased returns, the computer-implemented platform described herein can be used to reduce annual passive income and:

[0022] - lead to increased tax-reduced returns over time;

[0023] - provide leverage by only requiring 50% of the funds required to be paid upfront, with the balance of funds due on maturity, while earning a return on 100% of the funds on a maturity date; and

[0024] - allow compounding of the principal and income inside the RRSP on a tax-deferred basis;

[0025] wherein, in this way, the unlocked value can begin earning a tax-reduced and tax-deferred, leveraged and compounded return rather than waiting for the individual to accumulate a similar amount of funds to make the same investment down the road, if at all.

[0026] In one aspect, there is provided a method of making an investment utilizing unused annual and/or accumulated contribution room in an RRSP and/or a TFSA, or making an investment in TDI to defer passive income to a maturity date, the method comprising receiving, from an investor, on acquisition the payment of a first instalment and at maturity the payment of ' a second instalment together with a financial services fee. The investment comprises a principal protected product in the amount of the first and second instalment, when held to maturity, while providing a variable interest return based on the entire investment tracking an equity market index (e.g., S&P/TSX 60) positive price appreciation from acquisition and ending on a maturity date.

[0027] In another aspect, there is provided a computer readable medium comprising = computer executable instructions for executing using a computing platform, the provision of an 23740521.1 CA Application Blakes Ref: 78558/00022 investment utilizing unused annual and/or accumulated contribution room in an RRSP and/or TFSA or an investment in TDI, the computer executable instructions comprising instructions for performing the methods.

[0028] In yet another aspect, there is provided an investment computing platform comprising a processor, memory, and one or more communication interfaces, the memory storing computer executable instructions for executing using the computing platform, the provision of an investment utilizing unused annual and/or accumulated contribution room in an RRSP and/or TFSA or an investment in TDI, the computer executable instructions comprising instructions for performing the methods.
BRIEF DESCRIPTION OF THE DRAWINGS

[0029] Embodiments will now be described with reference to the appended drawings wherein:

[0030] FIG. 1A is a schematic block diagram of a cloud-based computing environment in which an investment computing platform is deployed;

[0031] FIG. 1 B is a schematic block diagram showing relationships between entities connected via the investment computing platform shown in FIG. 1A;

[0032] FIG. 2 is a schematic block diagram of a configuration for an investment computing platform;

[0033] FIG. 3 is a flow chart illustrating a financing method implemented through the investment computing platform;

[0034] FIG. 4 is a flow chart illustrating the first three stages of an example financing performed using the investment computing platform for an RRSP;

[0035] FIG. 5 is a flow chart illustrating a fourth stage of the example financing performed using the investment computing platform for an RRSP;

[0036] FIG. 6 is a flow chart illustrating a fifth stage of the example financing performed using the investment computing platform for an RRSP;

[0037] FIG. 7 is a flow chart illustrating a sixth stage of the example financing performed using the investment computing platform for an RRSP;
-23740521.1 CA Application Blakes Ref: 78558/00022

[0038] FIG. 8 is a flow chart illustrating computer executable instructions that may be performed by an investment computing platform in registering new financial advisors;

[0039] FIG. 9 is a flow chart illustrating computer executable instructions that may be performed by an investment computing platform in registering new client investors;

[0040] FIG. 10 is a screen shot of an example of a user interface for providing an RRSP
investment calculator tool via the investment computing platform;

[0041] FIG. 11 is a screen shot of an example of a user interface for providing a TFSA
investment calculator tool via the investment computing platform; and

[0042] FIG. 12 is a screen shot of an example of a user interface for providing a TDI
investment calculator tool via the investment computing platform.
DETAILED DESCRIPTION

[0043] Turning now to the figures, FIG. 1A illustrates an example of a computing environment, in this example a cloud- or network-based computing environment in which an investment computing platform 10 is deployed in communication connection with one or more networks 12, also referred to commonly herein as "the network 12" for brevity.
The one or more networks 12 can include any combination of the Internet, corporate intranets, cellular or landline-based networks, etc. In general, the network 12 enables certain entities to communicate with the investment computing platform 10, and vice versa. For example, as shown in FIG. 1, client investors 14 can utilize a personal computing device 16 such as a desktop or laptop computer, tablet, smartphone, or other communication-capable device to interact with the investment computing platform 10 or another entity via that platform 10.

[0044] Also shown in FIG. 1A is a block 18 representing a device or system associated with a financial advisor 18 for ease of reference. As is known in the art, financial advisors 18 may act as a dealer or underwriter for any securities which are prospectus exempt, as a dealer for any securities sold to clients who qualify for purchase of exempt securities, and as a dealer for investment funds which are either prospectus qualified or prospectus exempt.
Financial advisors 18 are registered to buy and sell a variety of investments on behalf of a client investor 14, such as stocks, bonds, mutual funds, exchange traded funds (ETFs), and closed-end funds.
It can be appreciated that as shown in dashed lines in FIG. 1A, client investors 14 via the network, may invest directly or by using a financial advisor 18. The investor or financial advisor 18 can interact with the investment computing platform 10 via the network 12 or through some 23740521.1 CA Application Blakes Ref: 78558/00022 other communication link also shown available to an investor or a financial advisor using dashed lines in FIG. 1A.

[0045] FIG. 1A also illustrates a financial institution 20 in communication connection with the investment computing platform 10 via the network 12. As explained in greater detail below, the financial institution 20 may be engaged by the investment computing platform 10 and the entity controlling same to arrange a financing for a client investor 14 to facilitate the use of unused annual and/or accumulated contribution space in an RRSP or TFSA, by monetizing the unused annual and/or accumulated contribution limit, in the specific case of an RRSP
at the effective tax rate in the year of investment.

[0046] FIG. 1B illustrates certain entities that may communicate via the investment computing platform 10 shown in FIG. 1A. The financial institution 20 can communicate with a mutual fund trust 19 to implement one or more of the investment planning modules 27, namely RRSP, TFSA, and TDI modules 27. The mutual fund trust 19 may be in communication with an investment entity 21 associated with the platform 10, an investment fund manager 23, and a trustee 25 in this example.

[0047] FIG. 2 provides an illustrative configuration for implementing the investment computing platform 10. The platform 10 can include one or more cloud-based servers, running and operating one or more online services, along with a backend system such as customer relationship management (CRM) software. The configuration shown in FIG. 2 illustrates example functionality and it can be appreciated that certain components and interconnections may be omitted for the sake of clarity. In this example, the platform 10 includes a financial advisor module 30 responsible for interacting with and registering financial advisors 18 with the platform 10 and includes or otherwise has access to a financial advisor portal 32. The advisor portal 32 is a server-side software application providing a user interface for financial advisors 18 to interact online with the platform 10.

[0048] The platform 10 also includes a client investor module 34 that is responsible for interacting with investors and financial advisors 18 to register the client investors 14 and arrange investments using any one or more of the investment modules 17, namely the RRSP
module, TFSA module, or TDI module. The client investor module 34 includes direct access to a dashboard 36 or has access to a dashboard 36 through the financial advisor 18. The dashboard 36 is a server-side software application providing a user interface for investors and financial advisors 18 to enable client investors 14 to view and manage their accounts. The 23740521.1 CA Application Blakes Ref: 78558/00022 dashboard 36 can provide or link to an investment calculator tool 42 for any one of the investment modules 17, that can be used by an investor or a financial advisor 18 to simulate different scenarios to optimize the investor inputs and estimates. The client investor module 34 and dashboard 36 store and have access to the financial advisor's client records 40 for , maintaining client investment accounts. The platform 10 is connectable to the network 12 and/or any other entity directly via one or more communication interfaces 50, which may include wired and/or wireless network access technologies. Independently, or through the financial advisor 18, the client devices 16 can include browser or other portal access to the server-side applications described herein, or have a client-side application or "app" that can be used to interface with the platform 10.

[0049] It will be appreciated that the examples and corresponding diagrams used herein, particularly in FIGS. 1A and 2 are for illustrative purposes only. Different configurations and terminology can be used without departing from the principles expressed herein. For instance, components and modules can be added, deleted, modified, or arranged with differing connections without departing from these principles.

[0050] It will also be appreciated that any module or component exemplified herein that executes instructions may include or otherwise have access\ to computer readable media such as storage media, computer storage media, or data storage devices (removable and/or non-removable) such as, for example, magnetic disks, optical disks, or tape.
Computer storage media may include volatile and non-volatile, removable and non-removable media implemented in any method or technology for storage of information, such as computer readable instructions, data structures, program modules, or other data. Examples of computer storage media include RAM, ROM, EEPROM, flash memory or other memory technology, CD-ROM, digital versatile disks (DVD) or other optical storage, magnetic cassettes, magnetic tape, magnetic disk storage or other magnetic storage devices, or any other medium which can be used to store the desired information and which can be accessed by an application, module, or both. Any such computer storage media may be part of the investment computing platform 10, any component of or related thereto, etc., or accessible or connectable thereto. Any application or module herein described may be implemented using computer readable/executable instructions that may be stored or otherwise held by such computer readable media.

[0051] The investment computing platform 10 is used herein to implement and arrange an investment strategy that addresses the aforementioned underfunding of RRSPs and TFSAs or 23740521.1 CA Application Blakes Ref: 78558/00022 other savings by allowing investors or financial advisors 18 to enable client investors 14 to access funds to make contributions to a tax-deferral plan such as an RRSP, a tax-free plan such as a TFSA, or a tax-deferral plan such as a TDI. The investment strategy is executed by making available up to 50% of financing on the acquisition of an investment in a taxpayer's RRSP, TFSA, or TDI, as herein exemplified.

[0052] The investment strategy combines principal guarantee, affordability after income tax deduction (RRSP), increased returns on a tax-free basis (TFSA), increased returns on a tax-deferred basis (RRSP and TDI), leverage of a deferred repayment plan, and income upside of the positive price appreciation in an equity market based on the entire investment (100%) from the acquisition date until the maturity date, and can be provided with predictable financial = service fees. This allows the client investors 14 to generate increased future savings and/or save for retirement in the present, by catching up on all or a portion of their unused annual and/or accumulated RRSP contribution room, their unused annual and/or accumulated TFSA
contribution room, or TDI desired investment. For example, by taking advantage of both the unused annual and/or accumulated contribution room, and the immediate tax refund benefits and tax-deferral from the RRSP program, the tax-free aspects of the TFSA, the tax reduction and tax-deferral aspects of the TDI, the investor can make an investment with reduced upfront investor's cash contribution while earning a return on twice the amount initially invested.

[0053] As illustrated in FIG. 1A, the investment computing platform 10 is in communication with at least one financial institution 20. The financial institution 20 can be, for example, a Canadian Schedule 1 bank. The relationship with the financial institution 20 can be used to provide the underlying principal protection when held to maturity, through an investment in that institution's participating bank notes (PBNs), which feature capital protection with the upside of an equity index-linked return, or principal protected notes (PPNs). PPNs combine the "return of principal at maturity" feature of fixed-income investments with the "potential capital appreciation"
feature of equity investments. That is, PBNs and PPNs are used to protect against losses at maturity while providing the opportunity to participate in the gains on an equity investment. For example, PBNs and PPNs may provide exposure to the performance of an equity index with a guaranteed return of capital. They provide the potential of enhanced returns through the positive price appreciation of an equity index over their term. However, the issuer of the PBN or PPN, i.e., the financial institution 20, guarantees the return of capital even if the performance of the equity index is negative over the term of the PBN or PPN.

23740521.1 CA Application Blakes Ref: 78558/00022

[0054] In general, the RRSP investment strategy described in greater detail below enables a significantly reduced cash outlay. For example, per $1,000 invested:

[0055] A first instalment of $500 or 50% of the unit issue price is due on closing;

[0056] A second instalment of $500 or 50% of the unit issue price is due near the maturity date (e.g., 5 business days prior) with no personal security - the maturity date being a number of years from the closing date (e.g., 10 years); and

[0057] A financial services fee due at the same time as the second instalment.

[0058] The leverage is provided by income being based on 100% of the unit issue price with a minimum 80% participation on the upside performance of a market index over the investment time frame (e.g., 10 years) when only 50% of the unit issue price is paid upfront. This also increases the savings in the near term (rather than waiting for the equivalent accumulation of savings) to take advantage of the power of compounding interest.

[0059] Turning now to FIG. 3, a flow chart of transactions is shown to illustrate the investment strategy when using the RRSP investment module 17. At step la, a first instalment is made to the investment entity (i.e. mutual fund trust in this example), a product which can be made available via the investment computing platform 10. The upfront investment at step 1 a is an initial 50% of the unit issue price, and is due upon closing. At step 1 b, a PBN or PPN in the amount of 100% of the unit issue price is acquired by the investment entity mutual fund 10 from the financial institution 20 on closing.

[0060] Step 2b represents in part the second instalment, which is equivalent to the remaining 50% of the unit issue price, due just prior to the maturity date.
For example, step 2b preferably occurs five (5) business days prior to a maturity date. Step 2b also represents payment of the financial services fee by the client investor 14 of $310 per $1,000 of unit issue price at the same time as the second instalment.

[0061] = Step 3a represents in part the return of the protected principal to the mutual fund by the financial institution 20, on the maturity date, equal to 100% of the unit issue price. Step 3a also represents the return of variable interest, which is 100% of the positive price return of the index over the term of the investment. In step 3b, five business days after the maturity date, the principal (100%) of the unit issue price and 100% of the variable return is provided by the mutual fund 10 to the investor 14.

23740521.1 CA Application Blakes Ref: 78558/00022

[0062] To illustrate the advantages of this investment strategy, from the investor's perspective, an example is illustrated in FIGS. 4 to 7. Referring first to FIG. 4, an investor in step 1 of their investment pays $50,000 in this example to their RRSP. At step 2a, the investor's RRSP pays the first instalment of $50,000 due on closing to the mutual fund and at step 2b the investor's RRSP receives a $100,000 investment in mutual fund units. As also shown in FIG. 4, the mutual fund acquires a $100,000 PBN from the financial institution 20 at step 3 to guarantee 100% of the issue price on maturity.

[0063] Importantly, as shown in FIG. 5, a tax authority such as the Canadian Revenue Agency (CRA) in Canada, issues a refund at step 4 based on 100% of the cash contribution of the investment that was made, since it was contributed to an RRSP. In this example, the tax refund would be based on 50% of the investment, namely $50,000. That is, the investor can claim an income tax deduction equal to 50% of the unit issue price and any tax refund resulting from the contribution to the=RRSP will be paid to the investor or applied as a credit as an instalment against taxes owed. While the actual refund varies based on the jurisdiction (federal vs. province/territory, etc.), to illustrate in this example it is assumed that the individual investor 14 obtains a refund of up to $24,900 (based on a marginal tax rate of 49.80%), which means that the investor's cash outlay is only impacted by $25,100 for a $50,000 cash outlay and a total $100,000 investment. By engaging the investment computing platform 10, the investor is able to make a larger investment at an earlier stage, with smaller impact on cash flow, particularly when the investment is timed with a tax refund "season".

[0064] As shown in FIG. 6, at step 5a, the second instalment and financial services fee , (collectively, the "final instalment") would in this example be $81,000, i.e.
50% of the mutual fund units issue price provided at closing, plus a $31,000 financial services fee. The RRSP then pays the final instalment of $81,000 to the mutual fund at step 5b. However, at step 5c, the tax authority issues a tax refund or credit based on 100% of the cash contributed to the RRSP, in this case the final instalment. Using the above example marginal tax rate, this would amount to a tax refund or credit of $40,338, resulting in a net final instalment of $40,662 in cash outlay by the investor.

[0065] Turning now to FIG. 7, in this scenario, it is assumed that the financial institution has turned the $100,000 investment into $191,476 in holdings at the time the second instalment is made, i.e., a few days before the maturity date. In this illustrative example, the value paid to the mutual fund at step 6a by the financial institution represents an $100,000 initial investment plus 23740521.1 CA Application Blakes Ref: 78558/00022 6.72% annual variable participation return compounded annually for ten years.
In this scenario, the $191,476 paid by the mutual fund to the investor's RRSP at step 6b, namely at the maturity date, is the increase in the investor's retirement savings.

[0066] An example of the above using the investor's own funds is provided below in Table 1. =
Investor's Own Funds Investment amount S100,000 Investor's Effective Tax Rate is 53.53% on Closing and assumed in ten (10) years.
Fund Unit S&P/TSX 60 Historical Reference Index Return over ten (10) Year Periods Since Inception, is 6.72% annually Unlimited Return ¨ 100% of the positive price return of S&P TSX 60 Index without cap First Instalment (payable on acquisition) 50% of Unit Issue Price ($50,000) Less: Tax Refund or Credit based on Investor's effective tax rate of 53.53% in acquisition year or within sixty (60) days of calendar year-end S
26,765 Net Funding Requirement ($23,235) Final Instalment (payable five (S) days before maturity of Mutual Fund Unit) 50% of Unit Issue Price ($50,000) Financial Services Fee (equates to annual rate of 4.95% on Second Instalment) ($31,000) Less: Tax Refund or Credit based on Investor's effective tax rate of 53.53% in ten (10) years or within sixty (60) days of calendar year-end $
43,344 Net Final Instalment ($37,656) Total Net Instalment Amount ($60,891) Protected Unit Issue Price Unlimited Return ¨ 100% of the positive price return of S&P TSX 60 Index over ten (10) years, ¨ $100,000 6.72% annually $
91,297 RSP Balance - IRR 20.79% annually $191,297 For an Upfront Cost of $23,235 and a Final Instalment of $37,656 (total 60,891), your Investment could grow to $191,297 in 10 years within the RSP.
lire-invested within the RSP at the same rate of return, your savings could be as much as $366,578 In 20 years!
Table 1: Investment Summary

[0067] The chart in Table 2 below illustrates the RRSP balance that can be achieved for different assumed rates of return.

23740521.1 CA Application Blakes Ref: 78558/00022 ,S&P/TSX Year 10 Tax Refund on Net Year 10 Total Investor 60 First Tax Refund Upfront Second Instalment Second instalment Cost for Value of Funding Net Gain Internal, Index on First Net Final Wisdom Cost to Investor Rate of' Return Instalment Instalment* Funding Financ1;1 Services FFinancialS!rvices Instalment Mutual Fund- Return Units . $50,000 $26,765 $23,325 $81,000 $43,359 $37,641 ,i=.!;1;ig1q., $60,876 ),124 10.38%
I = S50,000 $26,765 $23,325 $81,000 $43,359 $37,641 lat,1901'0,0:,` $60,876 $33;124 1038%
1-- ' $50,000 $26,765 $23,325 $81,000 $43,359 $37,641 e,5:11*284 $ 60,876 I:7340$ 15.32%
$50000 $26,765 $23,325 $81,000 $43,359 $37,641 k. =14/11868, $60376 .:83,99.2 1635%
$50,000 $26,765 $23,325 $81300 $43,359 $37,641 sa$71642;744. $60376 ,t=S10001 18.33%
= $50,000 $26,765 $23,325 $81,000 $43,359 $37,641 0$1971,Tc91. $60,876 .5130,421 20.79%
$50000 $26,765 $23,325 $81300 $43,359 $37,641 VAII3b0 $60,876 1='135,487 21.19%
.* $50,000 $26,765 $23,325 $81,000 $43,359 $37,641 '41,554 $60376 , $154,573 22 57%
. _ 550 000 $26,765 S23,325 $81300 $43,359 S37,641 o26 201 $60376 S175,325 2333%
$50,000 $26,765 $23,325 $81,000 $43,359 $37,641 P.-C$28:728 $60,876 3 197,852 25.27%
Table 2: Summary of Hypothetical Scenarios for RRSP

[0068] To summarize, for an upfront cost of $23,235 and a final net instalment of $37,656, the investor's investment could grow to $191,476 in ten years within the investor's RRSP given an assumed 6.72% compounded annual return.

[0069] It can be seen that due to the principal protection, even with a 0%
or negative average annual return, the investor has an internal annual rate of return of 10.38%.

[0070] To further illustrate the advantages and flexibility provided by the investment strategy described herein, two case studies are provided below.

[0071] In the first case study, a hypothetical investor named Bob is used.
Bob, age 50 is a resident of the Province of Nova Scotia in Canada, has a current year taxable income of $240,000 and available RRSP contribution room of $150,000. Other cash priorities have Bob just starting to think about retirement savings. Bob becomes a client investor 14 and engages the investment computing platform 10 to invest in the mutual fund illustrated in FIG. 3. Bob decides to invest $50,000 in mutual fund trust units, payable in two instalments:

[0072] - He pays 50% of the unit issue price ($25,000) on closing from cash put into his RRSP. He receives an income deduction for the RRSP contribution in the amount of the total cash investment of $25,000. He will receive an income tax refund or credit of $13,500 making his net upfront cost $11,500 for a $50,000 investment; and

[0073] - He pays the 50% balance of the unit issue price ($25,000) at maturity in ten years, together with a financial services fee of ($15,500). He receives an income deduction for the 23740521.1 CA Application Blakes Ref: 78558/00022 RRSP contribution in the total amount of the final instalment of $40,500. He will receive an income tax refund or credit of $21,616 making his net cost in ten years of $18,884.

[0074] Assuming a 6.72% participation return, his $50,000 investment in his RRSP will be worth $95,649 at maturity in ten years for an internal rate of return (IRR) of 20.91%. On a net upfront cost of $11,500 and a final net payment of $18,884 in ten years (total cost = $30,384), Bob has started towards his retirement savings goals. If Bob reinvests those funds in his RRSP
at the same rate of return and with no further investment, his retirement savings will increase to $183,289 by the time he turns 70.

[0075] It may be noted that in this case study Bob can also consider investing $50,000 in each of the following two years to use his available RRSP contribution room and, thereafter, continue investing to keep up with his annual RRSP contributions.
= [0076] In summary, Bob in this case study has benefited from using the financial strategy described herein by:
[0077] - claiming a tax deduction for 100% per instalment when paid while only paying 50%
upfront;
[0078] - receiving instalment financing which results in 2:1 leverage, meaning Bob's investment return is based on double his initial investment;
[0079] - getting some of his available contribution room working for him;
[0080] - having a principal guarantee from the financial institution 20;
[0081] - earning a return on the upside price performance of the underlying market index over ten years;
[0082] - sheltering the return earned with no tax payable until withdrawn from the RRSP;
[0083] - investing to minimize the impact on his cash flow; and [0084] - paying no additional mutual fund management fees.
[0085] In the second case study, a hypothetical investor named Iris is used. Iris, age 41, is a resident of the Province of Ontario in Canada, has 2018 taxable income of $295,000 and available RRSP contribution room of $150,000. Having jut paid off undergraduate and graduate school student loans, Iris is now starting to think about her retirement savings. Iris becomes a client investor 14 and engages the investment computing platform 10 to invest in the 23740521.1 CA Application Blakes Ref: 78558/00022 mutual fund illustrated in FIG. 3. Iris decides to invest $150,000 in mutual fund trust units, payable in two instalments:
[0086] - She pays 50% of the unit issue price ($75,000) on closing from cash put in her RRSP. She receives a income deduction for the RRSP contribution in the amount of the initial instalment of $75,000. She will receive an income tax refund or credit of approximately $40,148 making her net upfront cost approximately $34,852 for a $150,000 investment;
and [0087] - She pays the 50% balance of the unit issue price ($75,000) at maturity in ten years, together with a Financial Services Fee ($46,500). She receives an income deduction for the RRSP contribution in the amount of the final instalment of $121,500. She will receive an income tax refund or credit of approximately $63,020 making her net cost in ten years $58,480;
[0088] Assuming a 6.72% participation return, her $150,000 investment in her RRSP will be worth $286,946 at maturity in 10 years for an IRR of 20.69%. On an upfront cost of $34,852 and a net final payment of $58,480 in ten years (total cost = $93,332), Iris has started towards her retirement savings goals. If Iris reinvests those funds in her RRSP at the same rate of return and with no further investment, her retirement savings will increase to $549,867 by the time she turns 61. Iris can also consider further investments in the following years to use her available RRSP contribution room.
[0089] In summary, Iris in this case study has benefited from using the financial strategy described herein by:
[0090] - claiming a tax deduction for 100% per instalment when paid while only paying 50%
upfront;
[0091] - receiving instalment financing which results in 2:1 leverage, meaning Iris's investment return is based on double her initial investment;
[0092] - getting up to 50% of her available contribution room working for her;
[0093] - having a principal guarantee from the financial institution 20;
[0094] - earning a return on the upside price performance of the underlying market index over ten years;
[0095] - sheltering the return earned with no tax payable until withdrawn from the RRSP;
[0096] - investing to minimize the impact on her cash flow; and 23740521.1 CA Application Blakes Ref: 78558/00022 [0097] - paying no additional mutual fund management fees.
[0098] Previous strategies do not focus on the effective tax rate of the investor at closing and therefore the ability to maximize the tax refund or credit based on the initial instalment and the same at maturity for the final instalment, reducing the net upfront and net final costs thereby maximizing the IRR, with the present strategy therefore having an improved tax efficiency and return. The calculator 42 can be used to arrive at an optimized situation given know investor inputs and estimates.
[0099] It can be appreciated that the investment strategy exemplified above is effectively monetizing the unused annual and/or accumulated contribution limit at the effective tax rate in the year of the investment. Unused contribution represents unlocked value to the investor by way of income deduction and resultant tax refund or credit. By planning the timing of income and investment one can maximize the refund and the net costs of the investment.
[00100] In a jurisdiction such as Canada, where unused RRSP contribution room accumulates until the end of the year in which the taxpayer turns age 71, the contribution room continues to grow alternatives can be provided by the platform 10 that allow investors to continue to monetize their unused annual and/or accumulated RRSP contribution limits. It may be noted that a long investment horizon only makes this investment suitable for an investor who will turn 71 before the investment matures, if the investor has other investments that can be rolled to a RRIF which will produce fund to meet the minimum required withdrawal requirements for the RRIF.
[00101] It can also be appreciated that the instalment nature of the investment doubles the potential investment that an investor can make (i.e. leverage) and allows the investor many years to save for the final instalment. Taxable income in the year of investment (or prior year if investing in first 60 days of a calendar year) may be considered the primary consideration to maximizing the refund or most tax efficiently saving. The calculator 42 can be used to determine the effective tax rate, adjusting for lower tax brackets for increased investment.
[00102] It may also be observed that the investor 14 can also request the tax authority (e.g.
CRA) to reduce deductions at source and tax quarterly instalments for which the effects are the same. It may be further noted that reduced taxable income in the current year also reduces tax = instalments in the subsequent tax year.

23740521.1 CA Application Blakes Ref: 78558/00022 [00103] The investment platform 10 can also allow the investor 14 to participate in investment plans using the TFSA and/or TDI modules 17. The TFSA module 17 can be used by eligible investors that want to earn income tax-free by investment funds being in a TFSA.
Similar to the RRSP module 17, the TFSA module 17 can be used to provide principal protection on 100% of the unit price when held to maturity with only 50% of the unit issue price paid upfront. This benefits the investor by providing leveraged returns on 100% of the unit issue price in an equity index with no cap. Moreover, for a TFSA, no tax is payable on income, and for a TDI, no tax is payable on income until maturity. The funds can also be redeemable periodically (e.g., every 6 months) at the prevailing value. Similar to the RRSP investment plan, the TFSA and TDI plans can be implemented without the investor incurring annual mutual fund management fees.
[00104] Unlike the RRSP investment plan, the TFSA and TDI plans do not include a tax refund. The following summarizes an example scenario that would apply for a ten year term and an investment of $100,000. In this case, the principal value of the investment is $100,000 and includes a first instalment on closing of $50,000. The second instalment in year ten would also be $50,000. Also due at maturity is a financial services fee of $31,000 in this example. As with the RRSP investment plan, there would be $100,000 in unit issue price protection at maturity, and a 100% participation return on the positive price upside performance of the underlying market at maturity with no cap. Table 3 below shows a set of hypothetical scenarios like those shown in Table 2, but for either the TFSA investment plan or the TDI investment plan.
year = = Year 10 Total Net Gain to Inveõstcieln,tafriar : Average: First; Instalment Second Instalment & Value of Wisdom Mutual Funding Investor :Riati=201 Ftsturit = otro.:,1 Financial Services Fee Fund" Units Cost $50,000 $81,000 ' , '1 $131,000 $(31,000) (9.22%) $50,000 $81,000 $131,000 $(31,000) (9.22%) $50,000 $81,000 $131,000 $0 0%
= $50,000 $81,000 .34.c1)1 $131,000 $3,284 0.64%
_ $50,000 $81,000 ,147,:,168 $131,000 516,858 2.95%
_ ______________________________ _ $50,000 $81,000 -162,`o77 $131,000 $31,577 5.03%
$50,000 $81,000 == 191 297 $131,000 $60,297 8.23%
$50,000 $81,000 $131,000 $65,363 8.72%
$50,000 $81,000 -.2 $131,000 $84,454 1040%
$50,000 $81,000 $131,000 $105,201 11.99%
$50,000 $81,000 /23 $131,000 $127,728 13.52%
Table 3: Hypothetical Scenarios for TFSA or TDI

23740521.1 CA Application Blakes Ref: 78558/00022 [00105] It can be seen that due to the principal protection, even with a 0%
or negative average annual return, at worst the investor loses the amount of the financial services fee, in the above scenarios a loss of $31,000. It can also be seen that in these hypothetical scenarios, only a return of 2.74% is needed to break-even on the investment.
[00106] For the investment computing platform 10, client investors 14 and financial advisors 18 can be managed and interacted with using a server-side configuration such as that shown in FIG. 2, which can utilize one or more internal databases and a CRM platform to record and maintain client investor records and transactions. The CRM platform can also be used as a communication tool between the entity (mutual fund) operating the investment computing platform 10, its financial advisor network, and its client investors 14. A
suitable CRM software package for this purpose, adapted to operate as described herein is provided by InfusionSoft .
InfusionSoft provides a cloud-based solution that can be customized and automated to provide back office and marketing processes for the investment computing platform 10.
[00107] In order to bring the securities to the market place, the platform 10 connects with one or more financial advisors 18. When a new financial advisor 18 is to be registered with the platform 10, a registration process can be initiated at step 100 as shown in FIG. 8. The registration process initiated at step 100 can be automated, as shown in FIG.
8 as follows. At step 102, a potential financial advisor 18 can be directed to the advisor portal 32 on a website provided by the investment entity, which displays the advisor portal 32 for the dealer at step 104. Once the financial advisor 18 enters the advisor portal 32, they can be provided with a selectable option "Not Registered With Us?", which can embed a CRM link that directs the financial advisor 18 to the registration page. As shown in FIG. 8, when the platform 10 determines at step 106 that a new registration has been initiated, the platform 10 can enable the completion of the registration page at step 108.
[00108] Once the potential financial advisor completes the registration fields they can initiate the vetting process at step 110 by selecting a "Sign Me Up" or similar option.
After selecting this option, a record and task can be automatically created in the platform 10 and an automated email generated and sent to an administrator (e.g., Advisor Services) notifying them of the submission. Once the automated email is received, the Advisor Services in this example can reach out to the potential financial advisor 18 to begin the vetting process and updates the database record with the relevant additional particulars. At step 112, the platform 10 determines if the potential financial advisor 18 has been approved or rejected. If vetted and 23740521.1 CA Application Blakes Ref: 78558/00022 rejected, an automated email can be sent at step 114, with a notification of the decision. Once the potential financial advisor 18 has been vetted and approved, the financial advisor 18 receives an automated email with an approval notification at step 116. This email can include a link to a client registration page in order to begin registering client investors 14.
[00109] An example of a client registration process is shown in FIG. 9. At step 200 the , platform 200 can display a client investor registration page using the client investor module and/or dashboard 36. The advisor portal 32 can also be adapted to provide client registration processes within that portal, e.g., for financial advisors 18 that are acting on behalf of individual client investors 14. The client investor registration page can be used to capture client investor data and create a new investor profile at step 202. This data can include, without limitation, client name, address, phone, email, investment amount, units, series, class and account type being opened, etc. This information can be extracted from the registration page and auto-populated in the same fields in the client record 40 at step 204. Other, investment information and calculations associated with the data can also be automatically populated by the platform 10.
[00110] Once the client investor registration page has been completed and submitted into the investment computing platform 10, an automated email can be sent to the individual creating the investor account confirming that the registration has been submitted and is under review at step 206. The information can be extracted and imported into the CRM system used by the platform to create an automatic contact record at step 208. This record can include, without limitation, name, address, phone number, email address, ID type, and associated financial advisor 18.
The platform 10 can also be configured to automatically calculate units, instalments, FSF, closing dates, etc. At step 208, the advisor portal 32 and/or dashboard 36 can also be enabled.
[00111] At step 210, the platform 210 instructs the entity requesting the new client registration on the submission of certain closing documentation. For example, a financial advisor 18 can be instructed to email the client investor's closing documentation package to a specific email address. At step 212, the platform 10 receives and reviews the closing documentation and creates a new account. For example, a client services employee may retrieve a closing documentation package from an email and upload it into a client record for that individual using a drop box tool. Once the closing documentation is loaded successfully into the client record, it is then reviewed for completeness and accuracy to determine if the investor is approved at step 214.

23740521.1 CA Application Blakes Ref: 78558/00022 [00112] Should the documentation be rejected, an automated email can be sent at step 216 with a rejection notification and indicating that a resubmission can be accepted. Once the documentation is approved at step 214, the process continues at step 218 by instructing the submission of the documentation and payment of the funds owed at closing. Once the client investor's closing documentation is received, it can be data stamped and all remaining particulars (if any) entered into the client record. The documents may then be held until the closing occurs. As indicated above, a customized dashboard 36 can be provided that manages all activities and the status of each client record 40 and transaction from inception through to closing. The dashboard 36 can also provide access data from various offerings and the ability to sort and search by tags. As indicated at step 220, report generation and portal updating are provided after the registration is completed. It can be appreciated that this reporting functionality can dynamically provide the ability to tag transactions with other records.
[00113] The platform 10 can also be configured to automate various other server-side processes, such as:
[00114] - interfacing with the trustee of specimen plans in Canada for registered account setup;
[00115] - performing commission calculations for the financial advisors 18 for each closing, payment requisition reporting to AP and automated confirmation emails to financial advisors 18;
[00116] - providing financial advisors 18 access to CRM to access client records and upload closing documents to review for suitability of investment and final approval of subscription agreement documentation prior to closing;
[00117] - use of CRM software for reporting functionality to export data to spreadsheet format for post-closing regulatory filings;
[00118] - use of CRM software to communicate by automated email with client investors of important early'redemption and scheduled maturity dates;
[00119] - use of CRM software to communicate with client investors wishing to exercise early = redemption rights;
[00120] - use of CRM software for automated emails to subsets of transaction database; and [00121] - use of CRM software for automated notice emails of upcoming offerings.

23740521.1 CA Application Blakes Ref: 78558/00022 [00122] The platform 10 can also provide an investment calculator tool 42, 44, 46 for the respective investment modules 17, as shown in FIG. 3. Turning now to FIG. 10, an example of an input user interface is shown. The user interface can be provided through the advisor portal 32 and/or dashboard 36 and/or via a public-facing website, to enable the financial advisors 18 to show potential and existing investors' details for evaluating different scenarios and different investment amounts. In FIG. 10, the shaded boxes represent input boxes that enable the user to enter certain variables and calculate the resultant values. In this example, the calculator tool 42 enables the user to enter the available RRSP contribution room, the estimate taxable income for that user, the proposed investment amount, an expected rate of return, and an estimated withholding tax rate, and the investor's own resources for the final instalment (if any). The calculator 42 also provides a drop-down menu to select the province of residence and a "Calculate" button.
[00123] For the available RRSP contribution room, additional notes can be provided to guide the user to certain documentation that may indicate the room, for example, a notice of assessment issued by the CRA in Canada. The estimated taxable income should be the taxable income for the current year, or if applicable, the year in which the investment will be made. This determines what the likely tax refund or credit that can be obtained through the investment. The investment amount can be within certain ranges such as between a minimum permitted by the mutual fund, up to the lesser of the estimated taxable income in the current year, or the unused RRSP contribution limit. It can be appreciated that the estimated rate of return is used for illustrative purposes, particularly when these return rates cannot be guaranteed.
[00124] The return participation rate that is listed in this example corresponds to the rate of participation or cap in the index return at the maturity date. This rate is set at the time of the offering and would be disclosed to the user in an offering memorandum. The variable participation rate corresponds to the return based on the return participation rate, and the effective tax rate would be based on the estimate taxable income and the province (or state, etc.) in which the investor resides. The withholding tax rate represents what tax rate the individual is expected to pay when the investment matures, in this example at year 10.
[00125] The first and final instalment amount would be listed for the user, and in this example are the same as those exemplified above.

23740521.1 CA Application Blakes Ref: 78558/00022 [00126] Various other tools can be coupled to the calculator 42, such as a calculated report (after selecting "Calculate"), a cash flow schedule, a tax schedule. Various other resources can also be provided with the calculator 42, such as a chart of current tax rates by province/state/jurisdiction.
[00127] FIG. 11 illustrates an example of a TFSA calculator 44, and FIG. 12 illustrates an example of a TDI calculator 46. As with the RRSP calculator 42, the calculators 44, 46 shown in FIGS. 11 and 12 enable users to run hypothetical scenarios based on the contribution room, instalment amounts, expected rate of return, etc. Reports can also be exported and the entry values cleared to allow the user to run these estimates iteratively.
[00128] For simplicity and clarity of illustration, where considered appropriate, reference "
numerals may be repeated among the figures to indicate corresponding or analogous elements.
In addition, numerous specific details are set forth in order to provide a thorough understanding of the examples described herein. However, it will be understood by those of ordinary skill in the art that the examples described herein may be practiced without these specific details. In other instances, well-known methods, procedures and components have not been described in detail so as not to obscure the examples described herein. Also, the description is not to be considered as limiting the scope of the examples described herein.
[00129] The steps or operations in the flow charts and diagrams described herein are just for example. There may be many variations to these steps or operations without departing from the principles discussed above. For instance, the steps may be performed in a differing order, or steps may be added, deleted, or modified.
[00130] Although the above principles have been described with reference to certain specific examples, various modifications thereof will be apparent to those skilled in the art as outlined in the appended claims.

23740521.1

Claims (17)

Claims:

1. A method of making an investment against unused annual and/or accumulated contribution room in a registered retirement savings plan (RRSP) and/or a tax-free savings account (TFSA), or making an investment from a tax deferred income (TDI) cash account, the method comprising:

receiving, by a mutual fund from an investor, a first of two instalments that together equal an investment, the first instalment in an RRSP and/or TFSA or TDI cash account being paid to the mutual fund;
paying, by the mutual fund, an amount equal to the investment principal at maturity plus a variable interest return of the positive price appreciation of an equity market index without cap, investor's RRSP and/or TFSA, or TDI cash account;
obtaining a principal protected product in the amount of the investment for a term ending on a maturity date; and wherein a second of the two instalments is payable on or before the maturity date with a financial services fee.

2. The method of claim 1, wherein the first and second instalments are each equivalent to 50% of an issue unit price for the investment.

3. The method of claim 1, wherein the principal protected product comprises participating bank notes (PBNs) or principal protected notes (PPNs).

4. The method of claim 1, wherein the second instalment and financial services fee are payable a prescribed number of days prior to the maturity date.

5. The method of claim 4, wherein the prescribed number of days is five business days.

6. The method of claim 1, wherein the term is for a long term (e.g., ten years).

7. The method of claim 1, further comprising obtaining the final instalment at the maturity date from the investor's RRSP and/or TFSA, or TDI cash account.

8. The method of claim 1, wherein a tax refund or credit resulting from the income deduction for the cash contribution to the investor's RRSP is paid to the investor directly at either or both shortly after closing and maturity.

9. The method of claim 1, wherein the tax refund or credit resulting from the income deduction for the cash contribution to the investor's RRSP is applied as an instalment against taxes owing.

10. The method of claim 1, wherein the financial services fee is a fixed amount.

11. The method of claim 1, wherein the investment is made by a mutual fund trust.

12. The method of claim 1, further comprising:
providing a computing platform connectable to one or more client investors and the financial institution via one or more networks, and retaining client records for the client investors;
and providing at least one online portal or dashboard to register with an entity coordinating the investment.

13. The method of claim 12, wherein the computing platform comprises a customer relationship management (CRM) software executable to automate a registration process and to manage the client records.

14. The method of claim 12, further comprising provide a calculator tool via the computing platform, to enable the investor to enter variables associated with the investment.

15. The method of claim 13, wherein the CRM software is configured to generate automatic email messages to notify potential registrants of approval or rejection of review processes.

16. A computer readable medium comprising computer executable instructions for executing using a computing platform, the provision of an investment against unused annual and/or accumulated contribution room in an RRSP or TFSA, or an investment for the TDI
cash account, the computer executable instructions comprising instructions for performing the method of any one of claims 1 to 15.

17. An investment computing platform comprising a processor, memory, and one or more communication interfaces, the memory storing computer executable instructions for executing using the computing platform, the provision of an investment against unused annual and/or accumulated contribution room in an RRSP or TFSA, or an investment for the TDI
cash account, the computer executable instructions comprising instructions for performing the method of any one of claims 1 to 15.